1. Compute the cost of debt. Assume AirJet Best Parts Inc. is considering issuing new bonds. Select current bonds from one of the main competitors as a benchmark. Key competitors include Raytheon, Boeing, Lockheed Martin, and the Northrop Grumman Corporation. ,,a. What is the YTM of the competitor’s bond? You may use a number of sources, but we recommend Morningstar. Find the YTM of one 15 or 20 year bond with the highest possible creditworthiness. You may assume that new bonds issued by AirJet Best Parts, Inc. are of similar risk and will require the same return. (5 pts) ,,b. What is the after-tax cost of debt if the tax rate is 34%? (5 pts) ,,c. Explain what other methods you could have used to find the cost of debt for AirJet Best Parts Inc.(10 pts) ,,d. Explain why you should use the YTM and not the coupon rate as the required return for debt. (5 pts) ,
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